The Maryland Higher Education Commission could not account for $3.2 million in scholarship funding and it failed to ensure that scholarship winners were eligible for financial aid, according to a state-sponsored audit.
State accounting records show the commission did not award $7.5 million in scholarship grants during fiscal 2009, but the commission reported only $4.3 million in unused funding, according to a report by Maryland’s independent Office of Legislative Audits.
Auditors now are requesting an investigation into the $3.2 million discrepancy.
“MHEC management could not provide us with an explanation of the difference,” the audit said. “As a result, the accuracy of the information reported to the budget committees was questionable. … We recommend that MHEC investigate and resolve the noted difference.”
Robert Parker, the commission’s director of student financial aid, said the missing $3.2 million is in an account state senators use to give scholarships.
“The money is there — it’s not lost,” Parker said.
He told auditors he thought he was following policy when he omitted the senatorial account from his fiscal 2009 report on unused scholarship funds. But “that wasn’t the kind of explanation they were looking for,” Parker said. Auditors did not return calls regarding the senatorial account. Neither did representatives from state Senate President Thomas V. Mike Miller Jr.’s office, which supervises the account.
The audit also found a number of holes in the commission’s process for awarding financial aid.
The commission could not verify that supervisors had reviewed and approved scholarship winners’ eligibility — or changes to their scholarship amounts — for years.
“As a result, there was a lack of assurance that financial aid awards were properly processed,” the audit noted.
The commission gave out $112 million in scholarships in fiscal 2009. More than $9 million — or about 2,000 scholarships — was awarded to students on the condition that they enroll in service projects in fiscal 2009.
But the commission did not ensure the awardees were meeting their obligations.
The audit reviewed a selection of 40 past winners and found the commission had no service verification for six students who were given a total $28,380.
The audit also selected 14 awardees who commission officials knew had violated the service requirement since 2006 — and found the commission had not obtained aid reimbursement from five of them, for a total $32,000.
The audit further reprimanded the commission for covering up $4.2 million in debt for fiscal 2009. The commission incurred the debt — an addition to its reported $6.8 million deficit for that year — by putting off legally required payments to community colleges for commuting students. Instead of reporting the deficit and requesting additional funding, as state law requires, the commission paid off the debt with fiscal 2010 appropriations.
“This is significant,” the audit notes, “because the amount of the unfunded liabilities is increasing each year and totaled approximately $11 million at June 30, 2009.”
Parker said a new processing system for financial aid records — slated for installation in late August — will address most of the problems highlighted by the audit.
